What is the maximum I can contribute to 401k?

Question

In tax year 2006, Since I am over 50 years old, I contributed $5,000 to a traditional IRA because I wanted to reduce my taxable income. My 401k contributions brought my income just a little over $50,000 so I was able to reduce my income by most of $5,000. Is there a limiy as to how much I can have my employer deposit into my 401k account? My income will increase a little and want to be able to contribute more so that my 2007 taxes can be reduced by a $5,000 traditional IRA contribution.

Answer 1

Since you are covered by a qualified retirement plan at work and have income of over $50k, not all of the IRA contribution is deductible if you are a single taxpayer. If your gross income exceeded $60k, none of it was deductible.

The maximum 401(k) contribution is the lesser of the amount your employer allows or the government guidelines -- $15,000 for 2006 and indexed for inflation for 2007 and later years. An employer match of up to 6% of your pre-tax salary is permitted above those amounts but again is NOT mandatory.

(The law also provides for catch-up contributions for over-50s but your employer does NOT have to allow those contributions)

Answer 2

Yes, but it all depends on your 401K plan through your employer and how much the IRS will allow you to invest during the year in any type of retirement plan. Last year my son actually put into his IRA Simple Retirement Plan, 5,000 more than the IRS allowed, but it was still to his advantage, he will have more retirement. He is self employed, so I think that makes a difference, you need the advice of your administrator of your plan and your accountant, if you want to invest in other things more than you work plan.

Answer 3

The maximum you can invest pre-tax in to a 401K is 20,000 dollars (that is 15,000 regular contribution limit + 5,000 the catch-up limit).

Thanks.

Answer 4

401k Maximum Contribution Limits
2004: $13,000
2005: $14,000
2006: $15,000